If there was one book that totally transformed my approach towards money, it had to be the Automatic Millionaire by David Bach. This book taught me that if I want to be successful with savings and investing, then you must make it automatic. The brilliance behind this concept is you can’t spend what you don’t see.
The reason why I love this so much is that if the money is taken out of your check before you have to spend it, then you are forced to live on less. There are a couple of ways to make savings automatic.
Change Your Direct Deposit at Work. Depending on where you work, you may have the option to select more than one bank account that your direct deposit can be allocated to. If this is available for you, then this is the best route. It’s the best because you truly never see the money in your checking account and in order to change it you have to resubmit the paper work with HR.
Transfer out savings once direct deposit hits. If option one isn’t available, then have your money automatically allocated to a separate bank once the direct deposit is received. Since you will see this money hit your account, the best thing to do is to have it transferred the day after you expect your direct deposit. For example, if you are paid on the 1st and the 15th, then have your money automatically transferred on the 2nd or the 16th. With this approach you allow enough time for the balance to be reflected in your bank account, but also not enough time to go out and spend since you know the money will be removed the next day.
In either case, I suggest that the bank that you choose to place your savings should be totally separate from the bank that you current bank with. The reason for this is that when you have a savings account at the same bank, when you want to spend you can access the money almost immediately. I learned this the hard way. I tried to have my emergency savings with the bank where I had my checking account. However, when I didn’t have the money in my checking account, I would just go in and transfer the money while I was in line at the store, and then I could buy what I wanted. When I changed the bank where I kept my emergency savings, it took 3 days to access my money and usually by the time I had the money I no longer wanted the item. It helped me to reduce my spending and curb impulse spending.
The same concept goes for retirement savings. You should have your retirement savings automatically deducted from your check. Not only will it make your savings automatic, but it will also have favorable tax implications as it reduces your taxable income.
The key is once you set it up, don’t touch it. If you decide to alter your plan, then only make adjustments that allocate more money towards savings instead of less.
Be sure to leave a comment to let me know how it goes!
Aisha Taylor is a #1 Amazon Best Selling Author of the book “5+5 FNPhenomenal Ways to Save $100 This Week Without Killing Your Lifestyle”, the Founder of FNPhenomenal (Frugal –n- Phenomenal), and creator of The Live Phenomenal Program. The Live Phenomenal Program is a program designed to give you the tools that you need to totally transform your finances, and stop living from paycheck-to-paycheck. It’s time for you to be Financially Phenomenal! Book your complimentary 20-minute financial clarity session with Aisha here.